The EUR/USD pair is currently experiencing downward pressure, trading just under the 1.0500 level in early European trade on Wednesday. This movement is influenced by a strengthening US Dollar as investors brace for the upcoming Consumer Price Index (CPI) data for November from the United States, which could further signal market direction.
Yesterday, the EUR/USD saw a decline, closing in the red, as it approached the significant support level around 1.0500. The US Dollar has been bolstered by rising Treasury bond yields, enhancing its appeal against other currencies. The prevailing risk-averse sentiment in the market has also contributed to the dollar’s strength, compounding the challenges faced by the EURO .
Analysts predict that the annual CPI in the US will increase to 2.7% in November, up from 2.6% in October. A rise in the core CPI by 0.3% on a month-over-month basis is expected, which would align with the prior month’s performance. Should the core CPI exceed expectations, the dollar is likely to strengthen further, pulling the EUR/USD pair lower. Conversely, a lower-than-expected reading could potentially reverse the pair’s trend.
Attention will also turn to the European Central Bank’s monetary policy meeting on Thursday. This event could add volatility to the EURO and significantly influence the reaction following the US inflation data.
From a technical perspective, the EUR/USD pair has pierced the 1.0520 level, which serves as a convergence point for the 100-period Simple Moving Average on the 4-hour chart and the Fibonacci 23.6% retracement of the recent decline. The Relative Strength Index is indicating bearish momentum, having dipped below the 40 level. If resistance at 1.0520 is confirmed, sellers may remain active, targeting support levels at 1.0440 and subsequently 1.0400. However, a sustained rally above 1.0520 could re-establish upward momentum for the pair, aiming for 1.0600 and 1.0630.
